The Walt Disney Co is to buy Pixar Animation Studios in a $7.4 billion deal that gives Pixar animators creative control over the world's most famous cartoon studio and make Pixar's chief executive Steve Jobs Disney's largest individual shareholder.
Under the agreement, expected to close this summer, Jobs, who also heads Apple Computer Inc, will join Disney's board of directors.
Disney also will surrender control of its world-famous animation studio, the birthplace of Mickey Mouse, to Pixar creative chiefs, Ed Catmull and John Lasseter. Disney's animation studio, the birthplace of classic Snow White, will be combined with Pixar animation operations under Catmull's leadership but the two will maintain separate studios.
That hands-off management arrangement is similar to the one Disney adopted with Bristol, Connecticut-based ESPN cable sports network, which Disney acquired in 1996, Disney chief executive Robert Iger said.
Pixar's six films with Disney, including Toy Story, Finding Nemo and The Incredibles, have grossed more than $3.2 billion.
"As I considered the possibility of returning Disney animation to greatness, it was clear to me that maintaining a relationship with Pixar was essential," Iger told analysts on a conference call.
Jobs said he and Iger spent the bulk of their discussions addressing how to preserve Pixar's free-wheeling creative culture, which both described as the key to its box office success.
Chief financial officer Tom Staggs told a conference call with analysts that Disney aimed to continue double-digit earnings growth through at least 2008, when the Pixar deal probably becomes accretive. Disney's board also increased the company's stock buyback plan by 225 million shares, and Staggs said Disney expected to buy back about $5 billion or more in the next 12 months.
Pixar has over $1 billion in cash on its balance sheet, making the net value of the transaction about $6.3 billion, Staggs said.
Both boards of directors have approved the deal, which calls for 2.3 Disney shares to be issued for each Pixar share. Jobs owns a 50.6 percent stake in Pixar shares, which would translate into about 6 per cent of Disney shares after the deal. - (Reuters)
